LONGITUDE PRIZE: PART 8: PRICE STRUCTURE AND PLANNING FOR SCALE-UP
16
PART 8 PRICE STRUCTURE AND PLANNING FOR SCALE-UP The CP submitted with the LP is expected to outline a price structure for the end product based on a realistic balance between a number of somewhat competing factors: ✓ Willingness to pay (of the procurer – an institution or provider/patient – the ‘consumer’) This requires the end price to be sufficiently low to achieve the scale of use necessary to achieve health - impact goals – and consistent with requirements regarding equity of access. In the case of LMICs there may be a need to subsidize purchase (with government or international funds). ✓ Sufficient margin to ensure viability (profitability) of the manufacturer This is complex, and dependent on both the price paid by the consumer or health network, and any subsidies or buy-downs that are available to lower the price to the consumer and reduce requirements for amortization.
Cost variations through the development pipeline High costs can be incurred late in the development/market readiness process (Figure 4, Figure 5). These must be anticipated early for budgeting purposes, and to enable mitigation strategies to be developed. A CP must address the lag in recovery of funds through sales and demonstrate that subsequent sales can credibly be expected to cover outstanding prior costs and encumbrances. Regulatory and market preparation costs are discussed elsewhere in this document.
Earnings on sales Costs
• Late stage trials, regulatory costs • Product registration • Development of ancillary items • Training materials etc.
Money
Income exeeds expenditure
Product development
Product launch
Production, distribution and support
Time Figure 5. Product costs versus income through the product development process and early launch
